Harley-Davidson, Ares Capital sell on low-volume day; Cisco notes firm 20 bps; banks mixed

By Andrea Heisinger and Cristal Cody

New York, Jan. 26 - There was a low level of activity in the investment-grade bond market for the third day in a row Thursday.

A couple of deals priced. One of those was from Harley-Davidson Financial Services Inc. The financing arm of the motorcycle maker priced $400 million of five-year paper via Rule 144A and Regulation S.

Ares Capital Corp. priced its issue of $25-par 10-year senior notes that was announced on Wednesday. The size was increased to $125 million from $100 million.

National Rural Utilities Cooperative Finance Corp. announced an offering of collateral trust bonds in two tranches.

"I would say it was pretty dull today even though we had some stuff to work with," said one source away from the day's deals.

Issuers had held back from pricing anything on Wednesday as they awaited an announcement from the two-day Federal Reserve's Federal Open Market Committee meeting.

"Harley came after earnings, so it's not surprising," a source said. The company hadn't priced notes in almost a year. Parent company Harley-Davidson Motor Co. announced positive fourth-quarter earnings earlier in the week.

The Markit CDX Series 17 North American Investment Grade index firmed 1 basis point to a spread of 101 bps.

In the secondary market, Cisco System Inc.'s notes due 2021 traded 20 bps better over the day.

Bank and financial paper was mixed.

Bank of America Corp.'s 7.625% notes due 2019 widened to 384 bps from 367 bps on Wednesday, a source said Thursday.

Citigroup Inc.'s 8.5% notes due 2019 firmed to 305 bps from 319 bps.

Elsewhere, Canadian Pacific Railway Co.'s bonds ended unchanged on the day and over the week, a source said.

Overall trading volume ended about $2 billion higher at $17 billion on Thursday.

Treasuries rallied as buying rose a day after the Federal Reserve said it will keep rates low through 2014. The benchmark 10-year Treasury note yield fell 7 bps to 1.93%. The 30-year bond yield dropped to 3.09% from 3.15%.

Harley-Davidson prices

Harley-Davidson Financial Services sold $400 million of 2.7% five-year medium-term notes (Baa1/BBB/BBB+) to yield Treasuries plus 195 bps, a source close to the trade said.

The paper was priced under Rule 144A and Regulation S.

The bookrunners were Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc.

The financing arm of Harley-Davidson is based in Milwaukee.

National Rural's bonds

National Rural Utilities Cooperative Finance will price a two-tranche issue of collateral trust bonds (A2/A), according to a 424B5 filing with the Securities and Exchange Commission.

The active bookrunners are KeyBanc Capital Markets Inc., Mitsubishi UFJ Securities (USA) Inc., RBC Capital Markets LLC and RBS.

Proceeds will be used for general corporate purposes including to repay short-term debt and, along with cash on hand and other funding, to fund the repayment of outstanding 7.25% medium-term notes due on March 1.

National Rural last sold bonds in a $175 million issue of one-year floating-rate notes on Dec. 7.

The market lender for electric cooperatives is based in Herndon, Va.

Ares Capital's preferreds

Ares Capital sold $125 million of 7% $25-par 10-year senior notes, a source said.

The deal, which was announced Wednesday, was upsized from $100 million and came in line with price talk.

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC are the bookrunners.

Proceeds will be used to pay down debt under the firm's revolving credit facility or revolving funding facility. Any leftover proceeds will be used for general corporate purposes, including investing in portfolio companies in accordance with the company's investment objective.

The notes will be listed on the New York Stock Exchange.

Ares, a specialty finance company, is based in New York.

Cisco firms

Cisco's 4.95% senior notes due 2021 (A1/A+/) tightened 20 bps to 35 bps on Thursday, a source said.

The issue was sold in February 2009 at a spread of 200 bps over Treasuries.

San Jose, Calif.-based Cisco produces internet protocol-based networking and other communications and information technology products.

Canadian Pacific Railway flat

Canadian Pacific Railway's 4.5% notes due 2021 and 5.75% bonds due 2033 traded unchanged, according to a bond source.

The notes due 2021 (Baa3/BBB-/) were flat at 236 bps over Treasuries. The issue priced on Nov. 28 at a spread of Treasuries plus 275 bps.

The tranche of 5.75% long bonds also ended unchanged at 285 bps plus Treasuries. The bonds were sold at a spread of 300 bps.

The railroad operator is based in Calgary, Alta.

Stephanie N. Rotondo contributed to this review

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